On May 26, Merck & Co. (MRK -0.03%) announced that it's working toward a COVID-19 vaccine through a series of new plans. As a part of the company's COVID-19 strategy, Merck will acquire Themis Bioscience, a private Austrian biotechnology company to utilize Thermis as a manufacturing partner. The acquisition is a part of Merck's efforts to expand its pandemic response infrastructure through international cooperation and new product development.
The healthcare giant also announced new government funding to help its COVID-19 work along. On a different note, you should pay attention to competitors like Novavax (NVAX 3.27%). A vaccine candidate built on the company's NanoFlu platform to fight the novel coronavirus disease provides an additional entry for the future. So, what should investors think about this news, and could this deal catalyze its stock?
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A new deal for Merck
Merck bought out Themis for an undisclosed cash sum. Once the deal is complete, Themis will be a wholly-owned subsidiary of Merck. This new deal for both companies will grant Merck access to the Themis vaccine platform to bolster its international research and vaccine manufacturing capacity through other potential immuno-oncology applications. Themis is developing several vaccines, already, through a measles virus vector that was designed prior.
Immune-modulation therapies enhance different aspects of a patient's immune response to fight cancer. Themis uses a similar process when developing virus vector platforms to eventually innovate and produce vaccine candidates to curtail the viral infection of SARS-CoV-2, to prevent COVID-19.
BARDA funds and other partnerships for Merck
The Biomedical Advanced Research and Development Authority (BARDA), an agency in the Department of Health and Human Services, awarded Merck $38 million for the development of its COVID-19 treatment entries.
Merck also announced other new collaborations. It will be working with the nonprofit International AIDS Vaccine Initiative to develop a vaccine candidate and with Ridgeback Biotherapeutics to develop an antiviral treatment for those already ill with COVID-19. Merck's development of vaccines and therapies are entering or are currently in the first round of clinical trials against the COVID-19 virus.
Other BARDA developments
BARDA is a public-private interface between the Department of Health and Human Services and the biotechnology space to foster the timely development of advanced research in pharmaceuticals and therapies. The agency utilizes grants and other forms of assistance to incentivize innovation and development across medical devices, tests, vaccines, and other therapies. The Merck agreement with BARDA provides initial funding for the development of these efforts.
The agency is granting large sums of funding to other biotech companies to develop vaccines and wider infrastructure for supply chain implementation. In an effort of "creating a U.S.-based manufacturing supply chain for pharmaceutical and biotechnology innovators of Covid-19 vaccine candidates," BARDA granted nearly $628 million to Emergent Biosolutions (EBS 0.49%).
The BARDA agreement also comes as Emergent continues its partnerships with companies like Novavax.
Novavax is following a similar line to that of Merck
Novavax made gains in trading early last week of May. The Maryland-based vaccine development company announced that it is ramping up its COVID-19 response through the acquisition of Praha Vaccines, based in Czechia. The acquisition, according to Novavax, will allow the company to eventually manufacture over 1 billion doses of the company's investigational COVID-19 vaccine, currently still in clinical phase 1 and 2 trials.
Praha owns a 150,000-square-foot facility for biologics and vaccine manufacturing near Prague. About 150 of Praha's employees have joined Novavax. The company announced in the last week of May that it has enrolled human subjects for a phase 1 and 2 trial for the experimental COVID-19 vaccine candidate. The human trial for the vaccine candidate is expected to produce results by July.
On May 26, Novavax's stock skyrocketed by 15.2% upon the announcement of the news and weeks of the trial after it's $388 million grant from a medical research foundation to develop its vaccine, from the Coalition for Epidemic Preparedness Innovations (CEPI).
The future for Merck and Novavax
Both Merck and Novavax have a lot of promise when it comes to their work toward a vaccine.At least ten other companies are developing COVID-19 vaccine candidates. Companies like Johnson & Johnson (JNJ 0.12%) are developing candidates on vaccine platforms that used to treat MERS and SARS coronaviruses.
For Merck, the company's overall capacity when you combine the track record of its successful vaccines and its new acquisition of Themis is expanded. Merck won FDA approval for ERVEBO in December of 2019.
This vaccine, designed to prevent Ebola, is the first candidate to receive marketing and commercialization authorization in the U.S. and the European Union.
Some analysts, considering the development of the vaccine and the news of the Themis purchase, believe that Merck's topline will potentially boost to upwards of $5 billion, which approximates to a share price impact of merely a few dollars. There is also no indication that it is experiencing any primary production or supply chain interruptions. Merck's long-term outlook could be an attractive investment, barring its decline of 14% for the year. Merck could be an attractive bet for the COVID-19 vaccine race.
Novavax could be an attractive bet, too. Following the round of recent announcements, B. Riley FBR analyst Mayank Mamtani raised Novavax's price target to $61 from $53, which reflects potential climb in the shares over the next year or so.
NanoFlu, Novavax's flagship flu shot candidate, is a strong indication of the company's vaccine legacy, too. Late phase 3 clinical trials showed the NanoFlu candidate to be more effective than Fluzone, the flu vaccine that's manufactured by Sanofi (SNY -0.08%). As I mentioned, the NanoFlu platform is being used as a framework for their COVID-19 vaccine candidate which is undergoing clinical trials in Australia.
The Novavax rating is Mamtani noted that the stock is still a buy given widespread potential similar to that of Merck's. That's up to you, though.
